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Should Central Bank Respond to Exchange Rates : An Estimated DSGE Model for Turkey

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  • Ozge Filiz Yagcibasi
  • Mustafa Ozan Yıldırım

Abstract

Our aim is to examine whether CBRT should respond exchange rate movements. We used a small open economy DSGE model based on Gali(2015). We estimated structural parameters of the model using Bayesian methods over quarterly Turkish data. Our preliminary findings indicate that applying strict inflation targeting is superior to any other alternative interest rate rule. However, a policy maker that values exchange rate stability should also respond to exchange rate fluctuations.

Suggested Citation

  • Ozge Filiz Yagcibasi & Mustafa Ozan Yıldırım, 2017. "Should Central Bank Respond to Exchange Rates : An Estimated DSGE Model for Turkey," EcoMod2017 10453, EcoMod.
  • Handle: RePEc:ekd:010027:10453
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